Turning Savings into Income

John Brandon, AAMS™, CPFA™

June 25, 2025

You’ve likely spent years building your retirement nest egg, saving diligently, investing wisely, and contributing to tax-efficient retirement plans like 401(k)s and IRAs. But the shift from saving to spending—turning your assets into a steady retirement income strategy—can feel overwhelming.

At BCS Wealth Management, we guide individuals and couples through this critical life stage with customized, tax-efficient plans for retirement income. Here's what to consider as you transition from earning a paycheck to relying on your savings.

Social Security: A Foundational Layer of Retirement Income

While Social Security may not cover all your retirement expenses, it can provide a reliable base of income. In 2025, the maximum monthly benefit at full retirement age is $4,018, or roughly $48,000 annually. For many, that’s enough to offset core living costs.

Social Security timing is everything to maximize a retirement income strategy:

Claim at 62: Reduced benefits (up to 30% less)
Claim at full retirement age (67): Full benefit
Delay to age 70: Increased benefits for life

Your health, financial situation, and employment status all play a role in determining when you should claim. Retirement planning with a financial advisor can help you make an informed, optimized choice.

Creating a Smart Withdrawal Strategy for Retirees: The Art and Science

Transitioning to income mode means deciding how and when to access your retirement accounts. Your withdrawal strategy should balance:

Longevity
Tax efficiency
Current and future income needs

We help clients design strategies that start with a deep analysis of their retirement assets, typically divided into three tax categories:

1. Taxable Accounts

Includes checking, savings, and brokerage accounts. These are funded with after-tax dollars and

capital gains tax may apply upon selling investments.

2. Pre-tax Accounts

These include 401(k)s and Traditional IRAs. Contributions are made pre-tax, grow tax-deferred, and withdrawals are taxed as ordinary income.

3. Post-tax Accounts

Roth IRAs and Roth 401(k)s are funded with after-tax dollars. Qualified withdrawals are tax-free, making them valuable assets to preserve for later retirement.

General rule: Start withdrawing from taxable accounts first, followed by pre-tax accounts, and finally Roth accounts, to allow your most tax-advantaged savings to grow longer.

Managing Market Volatility in Retirement

Market downturns can hurt your retirement income, especially early on. Here's how to protect your strategy:

Diversify Your Investments

Asset diversification helps reduce the impact of losses in any single investment category.

Build Short-Term Reserves

Create a cash reserve to cover 6–12 months of essential expenses, so you're not forced to sell during a downturn.

Use Flexible Withdrawals

Adjust withdrawals based on market performance. Take more when the market is up, less when it's down.

Adjust Spending Habits

Be intentional and flexible with spending to avoid unnecessary portfolio withdrawals in volatile markets.

Understanding RMD (Required Minimum Distributions) for 2025

Starting at age 73, you must take annual Required Minimum Distributions (RMDs) from traditional retirement accounts, including:

Traditional IRA
SEP IRA
SIMPLE IRA
401(k) plans

Missing an RMD can result in a 25% tax penalty (or 10% if corrected within two years). Planning ahead with your advisor ensures RMDs are accounted for in your broader income strategy.

The 10-Year Rule for Inherited IRAs

The SECURE Act changed how non-spouse beneficiaries inherit IRAs. For most heirs, the full balance must be withdrawn within 10 years of the original owner’s death. Starting in 2025, annual RMDs will also be required during this 10-year period.

Special rules apply for spouses, minor children, and those with disabilities, making professional guidance essential.

Should You Consider a Roth IRA Conversion?

A Roth IRA conversion involves moving funds from a traditional IRA to a Roth IRA, triggering taxes in the conversion year—but unlocking future tax-free growth and no RMDs for the original owner.

Roth IRA Conversion Benefits:

No RMDs for the original account owner
Potential estate planning advantages
Tax-free withdrawals in retirement
No income limits on conversions

Reasons to be cautious:

Conversion adds to your taxable income
The 5-year rule applies (early withdrawals may incur penalties)
A lower tax bracket in retirement may reduce the benefit

Pro tip: Consider converting during a market dip to reduce the tax impact.

Making Your Retirement Savings Last

Here are a few key strategies to improve retirement income success:

Stick to Your Plan

Build a diversified, risk-managed portfolio that aligns with your goals and stay committed, even in volatile markets.

Be Strategic with Withdrawals

Tap the right accounts at the right time to balance taxes and cash flow. The sequence of returns can add risk to a retirement strategy. Very low or negative portfolio returns, leading up to, or within the first couple of years of retirement may have adverse consequences to the withdrawal strategy for retirees.

Adapt as Needed

Markets and life change and so should your strategy. Schedule regular reviews with your financial advisor to make adjustments.

You Don’t Have to Navigate Retirement Alone

Whether you're approaching retirement or already enjoying it, BCS Wealth Management is here to help you create a customized retirement income plan built for security, flexibility, and growth.

Schedule a consultation today and let’s build a strategy tailored to your future.

Sources:

1. USAToday.com, March 20, 2025

https://www.usatoday.com/story/money/personalfinance/retirement/2025/03/20/max-social-security-benefit-2025/81887245007/

2. SmartAsset.com, October 14, 2024

https://smartasset.com/retirement/retirement-withdrawal-strategies-2

3. Fidelity.com, November 20, 2023

https://www.fidelity.com/learning-center/personal-finance/secure-act-2#:~:text=Starting%20in%202024%2C%20RMDs%20will%20no%20longer%20be,emergency%20savings%20account%20associated%20with%20a%20Roth%20account.

4. IRS.gov, March 2025

https://www.irs.gov/retirement-plans/retirement-plan-and-ira-required-minimum-distributions-faqs

5. PlanAdviser.com, December 20, 2024

https://www.planadviser.com/know-10-year-inherited-ira-rule/